As the pandemic brought economies to a near-halt, global carbon emissions fell 8% in the first four months of 2020. But at the Reuters Transform Europe virtual conference Tuesday, sustainability experts questioned if emissions reductions and steps toward more circular economies would continue during the coronavirus pandemic.
Practitioners said true commitment is resilient, and the work continues for companies with firm commitments in place pre-pandemic.
"I think companies have really thought this through and understand how interlinked everything is," said Katharina Stenholm, chief cycles and procurement officer at Danone, which, as a food company, depends on agricultural products threatened by climate change. "When you really start to think about this as a prerequisite — as your strategy — then it is not optional and something you can stop doing just because you hit a crisis," she said.
But that doesn’t mean it has been easy. Global supply chains have faced supplier disruptions, manufacturing shutdowns, transportation bottlenecks and wild swings in demand. This year is a big one for climate goals and some companies admitted they may not meet them perfectly, but that doesn’t mean the goals have lost importance internally. In some cases, sustainability efforts made supply chains more resilient as pandemic stresses began to mount.
Same tools, different applications
Schneider Electric put its close supplier relationships and in-depth auditing practices to use to keep on top of supplier health during manufacturing shutdowns, CPO Dan Bartel said.
"When we do things like vigilance audits and really go deep with suppliers on their labor practices ... you really start to get close to them. And I would say we leveraged those relationships to get some priority when we ramped them back up to come out of the crisis," said Bartel.
"Being agile, flexible and creative in solving problems ... those kinds of skills were really important to navigating through the current crisis."
CPO, Schneider Electric
Deeper supplier scrutiny is a necessity emerging from the pandemic as financial health becomes a crucial element in gauging the level of disruption risk. Bartel said working with suppliers on climate and social issues has solidified those relationships and provided his team with helpful tools during the pandemic.
Software Schneider typically used to monitor conflict mineral compliance, for example, became an important tool for monitoring real-time production status.
"Being agile, flexible and creative in solving problems — these are skills that our teams have honed while working with suppliers on various sustainability and social responsibility topics, and of course those kinds of skills were really important to navigating through the current crisis," he said.
Strong supplier relationships and a culture of ongoing communication were recurring themes among CPOs who shifted priorities to business continuity during the pandemic.
L’Oreal CPO Regine Lucas described the early weeks of the pandemic as "intense." L’Oreal decided it would do what it could not to "break the value chain" — not let any L’Oreal stakeholders fall by the wayside. The company changed payment terms to get more cash in the hands of suppliers that needed it.
Keeping those suppliers in business was important not just to maintain operations continuity, but because suppliers play a large part in L’Oreal's emissions goals. Losing suppliers to the pandemic would mean starting over with new players.
Bartel and Paul Campbell, senior VP of supply chain for PepsiCo Europe, said the tools used to keep track of suppliers’ sustainability gained even more importance in navigating pandemic supply disruptions.
PepsiCo Europe has been experimenting with digital maps of its supply chain to optimize costs and emissions.
"We created a digital twin of all of the transport flows right away from our material queue to our customers," Campbell said of the company’s 45 warehouses and 25,000 customers that receive direct delivery in Turkey. "We use state of the art algorithms to test every possible combination of raw material, factory and customer location. As a result, we found a significant opportunity to reduce dollars spent, as well as a 10% reduction in CO2 emissions, without compromising customer service."
When the pandemic hit, Campbell’s team used its maps to redesign supply lines to adjust to border and facility closures, alongside emission monitoring.
Reaching this point of agility has not been easy, he said. PepsiCo built the mapping system in-house and went through much data optimization and cleaning work to make it useful. "You need [a] strong foundation and people and capability," he said.
Lessons to learn
The pandemic experience may offer a lesson in mitigating the kind of risk climate change could present, according to a recently released report from The Sustainability Consortium and HSBC.
The authors suggest a complete integration of risk management into the culture of supply chains. This could lead to: a more diverse supply base; a deeper and longer-term investment in the success of key suppliers with transparency baked in; higher levels of standing inventory and/or working on longer timelines to provide more reaction time to disruption; more on-call operational capacity; and integrating contingencies for pandemic and climate change risk into supplier contracts.
Transformational steps can take time, but Pablo Perversi, chief innovation, sustainability and quality officer and head of gourmet for chocolate giant Barry Callebaut, said his number one takeaway from COVID-19 was his team can make big changes quickly — it’s just a matter of deciding to do so.
"When we all work together trying to solve something at speed, we can definitely do it."
Chief Innovation, Sustainability & Quality Officer and Head of Gourmet, Barry Callebaut
"When we all work together trying to solve something at speed, we can definitely do it, and if we apply it to the problems that we have today in sustainability, we can definitely move much faster," he said.
The wild card in the midst of a major economic stressor like a global pandemic is cost. The report argues that the moves toward supplier diversity and a more preventative approach to inventory management must be viewed as a hedge against the cost of future disruptions — from a pandemic or climate change.
"I think if we limit ourselves to cutting costs, we really limit our impact on the business, on the planet and on society at large," said Stenholm.
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